U.S. stocks closed mixed on Friday after the July monthly unemployment report showed the economy added 528,000 jobs, which was much more than expected.  The Dow industrial average rose 0.23%, the S&P 500 fell 0.16%, and the NASDAQ dropped 0.50%.  Karyn Cavanaugh, Chief Investment Officer of Carolinas Wealth Management, joins Cheddar News' Closing Bell to discuss.

Closing Bell

U.S. Stocks Close Mixed After Strong July Jobs Report

All right, well, let's take a look at these major indexes and talk more about how the markets closed. We do see that for the week, the major indexes were able to eke out gains even though today was a bit of a mixed market. As you see on your screen there, the dow, the only index up today. So joining me now is Karyn cavanaugh, chief investment officer of the private wealth advisory practice Carolina's wealth management. Thank you so much for coming on. What is your reaction to this to the stock market action this week? I think this is a very good sign that the market was so resilient because we got hit with some with some, some out of the, out of the blue news, the jobs market that you were talking about today, the number was so high that the market reacted negatively as we expected because that means that the Fed is going to have to act more aggressively. But do you see the way we came back and the dow closed positive. So that's, that's a good sign. The market resilience is a good sign. And it's showing that the mark investors are getting their sea legs back there realizing that earnings haven't been bad. We thought earnings were gonna fall out of bed when the season started the beginning of july. And that didn't happen. And we do see if the economy is slowing, maybe not the jobs market, but we see overall numbers kind of slowing down. We see the housing market slowing down. And so, uh, I think there's some more confidence that the Fed is actually gonna be able to maybe achieve a soft fish or softer kind of landing, given the fact that the job market is so strong. So even though it was negative that it was so it was so strong and that it would have to act more, there's also positive. It was the good news is good news and that the labor market is still showing signs of resilience. So maybe we could have a softer landing. Yeah, I do wanna focus a bit more on that. Karen, I know you mentioned the resiliency of the investor and the stock market and you're right, that has very much been on display. I mean, I think sentiment was so dire in june toward the start of july actually, the worst that we had seen since the start of the financial crisis, that a lot of people said a relief rally would be natural to happen. Well, we actually, by and large, with the fractional gains that we see for the dow and the S and P. This week, still see the market continue to melt a little bit higher. Based on the jobs data today, the services sector data on Wednesday, what does that tell you about the resiliency of the economy? Well, I think it's also showing that there's some resiliency in the economy too. If you take a look at the GDP numbers that we got. The consumer was actually a positive contributor to GDP. So it was more business investment and that's concerning business investment was negative. But the consumer is continuing to move forward and it may be more into terms of services rather than goods, but that's also showing it's a good sign for for future quarters. I'm definitely worried that we have a slowdown in growth and it is obviously it's gonna be really hard to slow the economy enough to tame this high levels of inflation without putting us into a deeper recession. But what I've seen, it's been very encouraging. And at the end of the day, when you see companies are continuing to make money, maybe the, the consumer discretionary sector is obviously under a lot of pressure. Same thing with communication services, but overall companies are making money and that's also a good sign because remember at the end of the day, everything that happens in the economy, the companies that are out there living every day, they're trying to grow their earnings. And so that's, it's a good, it's a good barometer of what's actually happening in the global economy. Look, I think the global economy right, is still causing some of the trepidation that we see among investors. These are unprecedented times. Um, we still have a pandemic. We still have supply chain issues that arise based on Russia's invasion of Ukraine based on china, zero tolerance policy when it comes to covid, another variant could pop up when it comes to the coronavirus. And so I think there is still some uncertainty out there. Karen as a chief investment officer, what are you advising your clients do in this scenario? Should they be looking to get back in the stock market or do you think that maybe they should wait a little bit longer? No, I, well there's always gonna be uncertainty in the market. If you wait for all the dust to settle, you'll never be in the market because there always will be something but the market is always looking forward and we've priced a lot of that uncertainty in already. And that's why we've seen this, this relief rally during this bear market. So I think that investors should be in the market at all all times because there's always opportunities, Look at the energy sector, for example, and that that's that in the doghouse for The last 10 years and the last year it's been the darling. So there's always opportunities and are going to be companies out there that do well in these kind of environments that can protect their their margins and and thrive in this and pass along these inflationary prices to the consumers. So I think that investors should be in the market. But I think they have to have an eye on good companies with good balance sheets. It's not gonna be like last year where everybody was from Covid and everybody gets a trophy, there's gonna be more dispersion. So there'll be good companies and bad companies. But I think it's still tilting more towards value than growth but also warning investors that don't don't forget about the technology sector because if we do have a growth scare and we do see more recessionary indicators then then growth is going to be at a premium and there's a lot of good tech companies that become screaming bargains. So I think I think Be more selective is the key for these kind of markets but be in the market because look at we are up 14% off the lows from from June and if you had riding out and saying this is a little bit too volatile but we are going to see more volatility. Unfortunately the Fed has got a long path ahead of it and we have some we have some more interest rate hikes and it's been a royal market. I think that's a good message right? Have to act at some point and and be proactive I think when it comes to investing in life in general. So obviously this week we had a lot of earnings, a ton of earnings um dropping actually in this four p.m. Eastern hour that we covered for our viewers. But we also have the big jobs data today and then the services sector data as we've discussed that we got on Wednesday. What are the key data points perhaps including earnings that you're going to be watching next week. Well I think earnings and anything to do with inflation or inflationary pressure. So it's really gonna be looking at all the different price levels. Whether you know taking a look at the components of C. P. I. So anything has to do with the consumer earnings or inflation because those are those are the consumers the game changer when it comes to G. D. P. If there continue to be strong. And that's that's one thing that we can just cross up our list and not to worry about but come the earnings continuing to look at those company earnings and one of the concerning things is that although second quarter earnings are coming in better than expected, we are seeing some some guiding down for the third quarter. So I'm gonna be looking at that laser focused on that because you know it's great that second quarter's coming in better than expected. But we don't want to see third quarter be a disappointment because that could really like a really royal market. So um and then any Feds seek any comments from any of the Federal Reserve members. Those are always always a kind of a market mover too. So I'll be looking at that as well. What do you think is the right move for the Fed Karen going forward? Its next meeting is in september two more meetings after that before the end of the year. Do you think that they should be more aggressive. Less aggressive or the same when it comes to rate rises well after the jobs number today, it's a 50 50 basis point um was baked in, but after the jobs number is more looking more like 75. I think they really have to continue on their path because inflation is, it affects everybody and it's actually more destructive than than a recession, especially a mild recession or whatever it is that we are in right now Uh inflation is is uh not having that price stability. It really uh it really erodes all the confidence and it has detrimental effects throughout the economy. So I think they have to really say we're gonna tame this and we're gonna tame it once and for all. So we are going to see an increase in September it will probably be maybe 75 basis points based on this job number and then we're going to continue to see that and that that is doing the right thing. I mean they are being data dependent but there are not going to be afraid to raise those rates because inflation really is something that has to, that we have to get rid of in order to see economic growth in the future. All right, Karen, cavanaugh, chief Investment Officer of Carolina's wealth management. Karen, thank you